Baltimoresun.com's tax-advice column features three experts from the Sparks accounting firm SC&H Group answering questions about preparing your return every Monday until April 15.
Sarah, Kellogg, Idaho: I got married in June of last year and we have two kids together - a 3-year-old and a 7-year-old. How do we file, joint or separately? I am so confused; any help would be great.
SC&H: Don't worry; this issue is often confusing to many individuals. This year you may file a joint return since, as of the last day of the year, you were married. In most circumstances, filing a joint return is more beneficial than filing separately.
One instance where it may work to your advantage to file separately would be if you both have similar income levels, but one spouse has a lot of medical expenses or business expenses. These expenses are subject to limitations based on your income. If you file separately, the income level used in calculating the limitation would be lower and may allow for a greater amount of deductions.
Shalanda, Baltimore: Can I claim the amount of my daughter's braces on my taxes?
SC&H: Braces are an allowable itemized deduction; however, all medical deductions will be reduced by 7.5% of adjusted gross income (AGI). Therefore, you may not receive any tax savings from this itemized deduction if your income is too high or if you do not have enough other medical deductions. You should consider this expense when investigating participating in a FSA, or cafeteria pla,n at work, where medical expenses can be funded pre-tax from your wage income.
Betty, Sun City West, Ariz:I own several mineral interests from which I receive monthly royalty checks. Some are for oil and some are for gas. What is the depletion allowance this year and what kind of expenses can I deduct from this money before paying federal tax? Also, must I pay state tax on this money? They originate from several states and that state's tax is deducted from the proceeds.
SC&H: Each year, you should receive a statement from the management of the mineral interests detailing the gross royalty income and expenses (i.e. taxes, interest expense, etc) that you must include on your individual income tax return. They should also provide you with both the cost depletion and percentage depletion amounts. Generally, you should use the method which gives you the larger deduction.
This income will also be taxable for state tax purposes, assuming you meet the minimum filing threshold for that state. Note that when calculating the tax for these states, you will want to be sure to include the amount of tax withheld from your royalty proceeds to reduce the tax due with this state tax return. In addition, to the extent that you file tax returns in non-resident states, you will be able to take a credit on your home state return for taxes paid to other states.
S. Anderson, Carroll County: From what tax year is the income and filing status determined for the rebate being discussed in Congress? I will file as single for tax year 2008; however, I filed as married for tax 2007. As married, we qualified for a rebate, but as single my income exceeds the amount allowed for singles. So since I do not qualify for 2008, what should I do if I get a rebate?
SC&H: Based upon the House version of the economic stimulus package, the rebate is based upon 2007 tax filing status. If you were married in the 2007 tax year, then your rebate will be based upon that.
Answers to selected questions are published in The Sun's Money & Life section on Sundays and online on Mondays.
Sarah, Kellogg, Idaho: I got married in June of last year and we have two kids together - a 3-year-old and a 7-year-old. How do we file, joint or separately? I am so confused; any help would be great.
SC&H: Don't worry; this issue is often confusing to many individuals. This year you may file a joint return since, as of the last day of the year, you were married. In most circumstances, filing a joint return is more beneficial than filing separately.
One instance where it may work to your advantage to file separately would be if you both have similar income levels, but one spouse has a lot of medical expenses or business expenses. These expenses are subject to limitations based on your income. If you file separately, the income level used in calculating the limitation would be lower and may allow for a greater amount of deductions.
Shalanda, Baltimore: Can I claim the amount of my daughter's braces on my taxes?
SC&H: Braces are an allowable itemized deduction; however, all medical deductions will be reduced by 7.5% of adjusted gross income (AGI). Therefore, you may not receive any tax savings from this itemized deduction if your income is too high or if you do not have enough other medical deductions. You should consider this expense when investigating participating in a FSA, or cafeteria pla,n at work, where medical expenses can be funded pre-tax from your wage income.
Betty, Sun City West, Ariz:I own several mineral interests from which I receive monthly royalty checks. Some are for oil and some are for gas. What is the depletion allowance this year and what kind of expenses can I deduct from this money before paying federal tax? Also, must I pay state tax on this money? They originate from several states and that state's tax is deducted from the proceeds.
SC&H: Each year, you should receive a statement from the management of the mineral interests detailing the gross royalty income and expenses (i.e. taxes, interest expense, etc) that you must include on your individual income tax return. They should also provide you with both the cost depletion and percentage depletion amounts. Generally, you should use the method which gives you the larger deduction.
This income will also be taxable for state tax purposes, assuming you meet the minimum filing threshold for that state. Note that when calculating the tax for these states, you will want to be sure to include the amount of tax withheld from your royalty proceeds to reduce the tax due with this state tax return. In addition, to the extent that you file tax returns in non-resident states, you will be able to take a credit on your home state return for taxes paid to other states.
S. Anderson, Carroll County: From what tax year is the income and filing status determined for the rebate being discussed in Congress? I will file as single for tax year 2008; however, I filed as married for tax 2007. As married, we qualified for a rebate, but as single my income exceeds the amount allowed for singles. So since I do not qualify for 2008, what should I do if I get a rebate?
SC&H: Based upon the House version of the economic stimulus package, the rebate is based upon 2007 tax filing status. If you were married in the 2007 tax year, then your rebate will be based upon that.
Answers to selected questions are published in The Sun's Money & Life section on Sundays and online on Mondays.